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Rackspace’s December 2022 ransomware attack disrupted its Hosted Exchange email service and led to several lawsuits. A federal court in Texas ordered the customers in consolidated putative class actions to pursue their claims through individual arbitration in May 2023; that procedural ruling did not decide whether Rackspace was liable. The available company and court records do not establish a final class settlement or damages payout to customers.
What happened to Rackspace Hosted Exchange?
The incident began around December 2, 2022, according to allegations described in a federal court order. Rackspace disclosed on December 6 that a ransomware incident had affected its Hosted Exchange environment and disrupted service. The company said its investigation indicated the incident was isolated to Hosted Exchange and that its other products were fully operational.
In a December 9 update, Rackspace said CrowdStrike had confirmed the incident was quickly contained and limited to Hosted Exchange. Rackspace said it was helping affected customers migrate to a new environment. The statements describe the company’s disclosures at the time; they do not establish the full scope of any customer’s individual losses.
Why did customers sue Rackspace?
Claims about access and customer impact
The Western District of Texas order describes consolidated putative class actions alleging that unauthorized individuals accessed Rackspace’s network during the December 2 incident. The actions alleged that more than 30,000 customers were affected and identified 37 named plaintiffs. These are allegations recounted in the court order, not findings that Rackspace was responsible for the attack or legally liable for resulting losses.
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Relief the lawsuits sought
The plaintiffs sought damages as well as injunctive or other equitable relief. In practical terms, the cases raised questions about compensation for alleged harm and requests for court-ordered remedies. The available records do not establish that the plaintiffs obtained either form of relief.
What did the court decide about the lawsuits?
Rackspace relied on terms in its customer agreements, arguing that they required routine backups, permitted service suspension during an attack, and included an arbitration clause and class-action waiver. On May 18, 2023, the federal court granted Rackspace’s motion to compel individual arbitration.
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This was a ruling about how the claims had to proceed under the agreements, not a judgment on whether the ransomware claims were true, whether Rackspace was negligent, or what any customer was owed. It also meant the consolidated customers could not proceed together in court as a class under the ruling; they were directed to individual arbitration.
Did Rackspace customers receive compensation?
The company and court records described here do not establish a final damages award or class settlement for the consolidated Texas actions. The arbitration ruling itself did not award money to customers. That is not proof that no individual customer later pursued arbitration or reached a separate resolution; the available records do not establish those individual outcomes.
For an affected customer, the amount and availability of any recovery would depend on the applicable agreement, the facts and documented losses, and the outcome of any individual proceeding. Rackspace’s 2023 Form 10-K said the company could not determine the probability of lawsuit outcomes or a reasonably expected loss range at that stage.
What costs did Rackspace report?
Rackspace Technology reported incident expenses of $5.9 million for 2022 and $5.2 million for 2023 in its 2023 Form 10-K. The company said these expenses included investigation, remediation, legal and professional services, and supplemental staff resources. These are company-reported incident costs, not a stated compensation fund or customer payout.
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The filing also disclosed cyber-attack insurance subject to deductibles and policy limitations. It does not establish that insurance paid a particular amount to customers or resolved their claims.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.What happened to the Hosted Exchange service?
Rackspace later said it sunset its on-premises Hosted Exchange platform and transitioned many customers to Microsoft 365 through its reseller agreement with Microsoft. That service transition is distinct from the lawsuits: migration away from Hosted Exchange does not, by itself, establish compensation or resolve an individual claim.
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